The political economy of developing countries: An empirical analysis

Margaret Mary LeClair, Fordham University

Abstract

This dissertation studies how policy uncertainty at the macroeconomic level generated by the political process influences growth, investment and trade in developing countries. Two separate but related features of the political environment—a transfer of national leadership and the overriding ideological bent of that leadership in office—are analyzed with reference to economic impacts. This work expands upon the writings of Alesina, Roubini, and Cohen, who suggest that the relationship between economic and political cycles is more complex than originally believed. Changes in the political structure of a country affect the security of property rights and lead to policy uncertainty. Thus, a government is judged according to its ability to foster an efficient marketplace where calculated risk taking will be properly rewarded. The paper takes the view that investors will use a “wait and see” attitude when adjusting to an untested government's commitment to create policies that will maximize domestic asset value. In this sense, political change and its attendant policy uncertainty impose an extra tax upon investment, especially in developing countries. As rate-of-return and convergence models fail to hold, policy uncertainty can be viewed as one explanation for why traditional formulas for development no longer succeed. ^

Subject Area

Economics, General|Economics, Commerce-Business|Political Science, General

Recommended Citation

LeClair, Margaret Mary, "The political economy of developing countries: An empirical analysis" (2001). ETD Collection for Fordham University. AAI9999828.
http://fordham.bepress.com/dissertations/AAI9999828

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